In Digital, the Real Winner Is Disruptive

I was tempted to just do an Olympics story, part deux this week. But because that’s still a broadcast TV story of ratings, flat screens, and some questionable color commentary, I’ll minimize my comments on Phelpsapalooza.

At the risk of inciting my fellow video writers’ ire, let me say that the bulk of the blogosphere needs to chill out. The number of column inches and blog characters devoted to complaining about the Olympics coverage was astounding. Most of it centered on berating NBC for trying to recoup its investment by controlling what time marquee events aired and not having live video streams of those same events. (The one exception to this was GigaOM head Om Malik, who simply and silently didn’t tune in due to China’s Tibetan policies.)

I’m not entirely siding with the draconian overlord of old media. However, the energy spent whining about how NBC wasn’t open enough could have been better spent thinking about an ad model that will actually move online video forward — and that isn’t the pre-roll.

As video moves online, the TV model of advertising is, to a large extent, being replicated. This is shortsighted and will lead to a similar erosion in viewership down the line. Ease of consumption isn’t a sustainable online model.

Because, as Fred Seibert of Next New Networks says, “If video alone were good enough, than TV would be just fine.” And we all know it isn’t, so let’s find a good model. That means more interactivity, more community, and more content that’s simple to share. It also means less traditional video pre-roll and less bland commercial messaging á la the Budweiser ads I had to sit through every time I wanted to watch a Michael Phelps victory at NBCOlympics.com.

All that said, it’s been a banner week for the pre-roll. Both Break.com and Tremor Media released studies touting the effectiveness of that ad unit, and both studies push the premise that advertising dollars should flow in that direction. Break tested four different types of IAB-sanctioned formats (interactive overlay, non-interactive overlay, interactive pre-roll, non-interactive pre-roll) and found a completion rate of 87 percent. That number seems high, but in the absence of not knowing how exactly the study was conducted, we’ll assume the captive audience stayed captive.

For its part, Tremor Media also cited completion rates upward of 80 percent, hammering home the idea that for professional content viewers are willing to sit through an ad to get what they want.

This leads us to Hulu. According to the latest Nielsen numbers, Hulu served 100 million streams in July, a number that has gone up month to month since the site went up. Now, like any good old media company, Hulu has hired an ad firm to help it market its wares. The total spend to help blow Hulu out is estimated to be about $50 million.

What’s most fascinating about the rise of Hulu, and the seeming persistence of pre-roll, is that should Hulu rest on its laurels, it and its investors are vulnerable to a more disruptive technology or company. Yes, the player works well, something you notice if you watch “Gemini Division” in NBC’s Silverlight player and in Hulu. But in the end, Hulu has only stretched online video so far — by allowing embedding and getting two megacorps to collaborate.

History teaches us that the real digital winner is truly disruptive. Hulu’s momentum, coupled with a new fall season and its $50 million marketing spend, will continue to be the center of gravity in the premium online video world for the short-term. But without further innovation to its model, it will begin to falter sooner rather than later.